How to Dissolve a Texas Corporation in 2023

The Basics of Dissolving a Texas Corporation

In general, every dissolution follows the same basic structure, with 5 basic steps. There are, of course, a lot more “nuts and bolts” to the process (read more about them here), but for now, let’s get a bird’s eye view:

• Vote to dissolve the corporation: Corporations are not solo endeavors, and ending them isn’t one individual’s call. First, your board will need to convene and vote on a motion to dissolve the corporation. After that, some corporations will need to have their shareholders vote for the dissolution as well (depending on the corporation’s bylaws).
• File the dissolution paperwork: Once your corporation’s members have decided to dissolve, you’ll reach out to the Texas Secretary of State and fill out the appropriate Certificate of Termination.
• Fulfill your tax obligations: Your corporation will need to pay any taxes due to the IRS and the Comptroller of Texas. This can be a multi-step process as you liquidate assets and pay any creditors.
• Cancel licenses and close accounts: If your corporation maintains any licenses or permits, this is the time to cancel them so you aren’t charged renewal fees. You should also close down accounts with vendors and your bank (once your financial affairs are settled).
• Notify your stakeholders: A dissolving corporation must settle any financial debts, liquidate its assets, and distribute the appropriate funds to its shareholders. Stakeholders must be notified so they can lay claim to their share in a timely fashion.

That’s the gist of dissolving a Texas corporation. But before you can truly start the process, you’ll need to answer one important question.

Who’s Dissolving the Texas Corporation?

Two key groups can dissolve a corporation: the original incorporators and the initial board of directors or the shareholders. The group initiating the dissolution affects how you file with the Secretary of State. So let’s talk about each.

Dissolving a Texas corporation by the incorporators or initial board of directors

In some cases, a Texas corporation might decide to dissolve before they really get things up and running. More specifically, if the corporation hasn’t issued stock or conducted any business yet, then the incorporators or initial directors will be the ones who vote to dissolve the corporation.

Once the dissolution vote passes, the corporation can start the paperwork process. First, you’ll need to get a certificate of tax clearance from the Comptroller. Once you have it, you can file the Certificate of Termination. Here’s the information required to complete this document:

• Name of the business
• Type of business being dissolved
• Date the entity was formed
• File number issued to the business by the Secretary of State
• Name and address of each governing person for the business
• Nature of the event causing termination: voluntary dissolution
• Effective date of the filing
• Attached tax clearance from the Comptroller of Texas
• Date the document was executed
• Name, title, and signature of an authorized officer

There isn’t a fee for obtaining a tax clearance certificate, but the Certificate of Termination costs $40. It’s reasonable to expect the Comptroller to take 4-6 weeks to process the certificate, and then the Secretary of State should process your paperwork within 3-5 business days.

Dissolving a Texas corporation by the shareholders

In a corporation that has issued shares, the dissolution process looks a little bit different, especially at the voting stage. Typically, the board votes for a motion to dissolve the corporation. Then that vote is brought before the shareholders for approval.

Once the shareholders have approved the dissolution, the corporation can file the paperwork steps, starting with obtaining a certificate of tax clearance from the Comptroller of Texas. Once it’s in hand, the corporation can file the Certificate of Termination (linked above). This form is identical to the one above. It costs $40 to submit.

The tax certificate usually takes 4-6 weeks to process and the Certificate of Termination takes about 3-5 days.

What About Administrative Dissolutions?

Sometimes, the state of Texas may force a corporation to dissolve against its will. Usually, this happens because a corporation hasn’t filed its annual report, paid its taxes, maintained its registered agent, renewed appropriate licensure, or some other clerical error. A corporation may also be dissolved for any activities that are ruled fraudulent or otherwise harmful to the public.

In most cases, these corporations can be restored and resume business. The process can be quite a hassle, but it is manageable. First, a corporation must resolve whatever issue caused its dissolution. A corporation with defunct annual reports, for example, would need to submit the reports and pay any missing fees (plus late fees).

After that, you’ll need to file for a tax compliance certificate from the Comptroller. Once you have it, you can formally apply for reinstatement by filing the Application for Reinstatement. There is a $75 filing fee. Texas charges some pretty hefty late fees for delinquent franchise tax reports, too. So you should expect your total fee to cost more than $75.

It’s far easier to avoid dissolution entirely; remain compliant with your corporation, and you can skip this step completely.